UK government borrowing narrows after EU credit

UK government borrowing nearly halved in December from a year earlier, helped by a rebate from the European Union.

Public sector borrowing, excluding state-owned banks, fell to a lower-than-expected £2.6bn last month, a £2.5bn fall from December 2016.

The UK received a £1.2bn rebate from the EU due to a reduction in the bloc’s budget and changes to contributions.

The Office for National Statistics (ONS) also noted the collapse of Carillion could affect public finances.

The ONS said that the government had stated it would provide funding required by the Official Receiver to maintain public services.

“Any impact of these financial interventions on public sector finances will be announced in due course,” it said.

The ONS said public borrowing for the financial year to date now totalled £50bn, down nearly 12% from the same period a year earlier.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said low public borrowing in December reflected falling government spending, “not a resurgent UK economy”.

Central government tax receipts rose more slowly in December than they had in the previous eight months, while current expenditure fell by 0.8% compared with the previous December “primarily because the UK received a £1.2bn credit from the EU”.

“The credit reflects both a reduction of the size of the EU’s budget and the underperformance of the UK economy this year; contributions are linked to the size of Britain’s economy relative to the rest of the EU,” said Mr Tombs.